Case Study Description of Best Buy's Turn-Around Strategy (2013)
CEO Hubert Joly must devise a turn-around strategy that will enable Best Buy to survive in an increasingly competitive consumer electronics market. By year-end 2012, Best Buy's stock price had dropped roughly 60% over a two-year period and same store sales and overall profitability were showing a consistent, negative trend. On the plus side, revenues were increasing (at a marginal rate), while Best Buy continued to dominate its competitors in terms of sales volume and U.S. market share. In addition, Best Buy's online business was growing by 15% to 20% each quarter. Still, critics were doubtful that Joly could save the company, which seemed intent on following Circuit City down the fast-track to bankruptcy.
Authors :: Marne L. Arthaud-Day, Frank T. Rothaermel
Swot Analysis of "Best Buy's Turn-Around Strategy (2013)" written by Marne L. Arthaud-Day, Frank T. Rothaermel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Buy's Joly facing as an external strategic factors. Some of the topics covered in Best Buy's Turn-Around Strategy (2013) case study are - Strategic Management Strategies, Corporate governance, Crisis management, Leadership and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Best Buy's Turn-Around Strategy (2013) casestudy better are - – increasing commodity prices, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs,
wage bills are increasing, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Best Buy's Turn-Around Strategy (2013)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Best Buy's Turn-Around Strategy (2013) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Buy's Joly, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Buy's Joly operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Best Buy's Turn-Around Strategy (2013) can be done for the following purposes –
1. Strategic planning using facts provided in Best Buy's Turn-Around Strategy (2013) case study
2. Improving business portfolio management of Buy's Joly
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Buy's Joly
Strengths Best Buy's Turn-Around Strategy (2013) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Buy's Joly in Best Buy's Turn-Around Strategy (2013) Harvard Business Review case study are -
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Buy's Joly digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Buy's Joly has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Buy's Joly is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Buy's Joly is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Best Buy's Turn-Around Strategy (2013) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Buy's Joly are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Strategy & Execution field
– Buy's Joly is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Buy's Joly in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Buy's Joly is one of the most innovative firm in sector. Manager in Best Buy's Turn-Around Strategy (2013) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Buy's Joly is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Buy's Joly is one of the leading recruiters in the industry. Managers in the Best Buy's Turn-Around Strategy (2013) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Strategy & Execution industry
– Best Buy's Turn-Around Strategy (2013) firm has clearly differentiated products in the market place. This has enabled Buy's Joly to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Buy's Joly to invest into research and development (R&D) and innovation.
Training and development
– Buy's Joly has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Best Buy's Turn-Around Strategy (2013) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Buy's Joly has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Best Buy's Turn-Around Strategy (2013) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Buy's Joly has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Buy's Joly is present in almost all the verticals within the industry. This has provided firm in Best Buy's Turn-Around Strategy (2013) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Best Buy's Turn-Around Strategy (2013) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Best Buy's Turn-Around Strategy (2013) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Marne L. Arthaud-Day, Frank T. Rothaermel suggests that, Buy's Joly is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Products dominated business model
– Even though Buy's Joly has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Best Buy's Turn-Around Strategy (2013) should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Buy's Joly has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Best Buy's Turn-Around Strategy (2013), it seems that the employees of Buy's Joly don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Buy's Joly supply chain. Even after few cautionary changes mentioned in the HBR case study - Best Buy's Turn-Around Strategy (2013), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Buy's Joly vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Buy's Joly, firm in the HBR case study Best Buy's Turn-Around Strategy (2013) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Best Buy's Turn-Around Strategy (2013), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Increasing silos among functional specialists
– The organizational structure of Buy's Joly is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Buy's Joly needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Buy's Joly to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Buy's Joly is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Best Buy's Turn-Around Strategy (2013) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Buy's Joly products
– To increase the profitability and margins on the products, Buy's Joly needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Best Buy's Turn-Around Strategy (2013) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Buy's Joly 's lucrative customers.
Opportunities Best Buy's Turn-Around Strategy (2013) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Best Buy's Turn-Around Strategy (2013) are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Buy's Joly can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Buy's Joly can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Best Buy's Turn-Around Strategy (2013) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Buy's Joly can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Buy's Joly can use these opportunities to build new business models that can help the communities that Buy's Joly operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Learning at scale
– Online learning technologies has now opened space for Buy's Joly to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Buy's Joly can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Buy's Joly in the consumer business. Now Buy's Joly can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Buy's Joly to increase its market reach. Buy's Joly will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– Buy's Joly has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Buy's Joly can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Buy's Joly has opened avenues for new revenue streams for the organization in the industry. This can help Buy's Joly to build a more holistic ecosystem as suggested in the Best Buy's Turn-Around Strategy (2013) case study. Buy's Joly can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Buy's Joly can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Buy's Joly can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Buy's Joly to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Buy's Joly to hire the very best people irrespective of their geographical location.
Threats Best Buy's Turn-Around Strategy (2013) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Best Buy's Turn-Around Strategy (2013) are -
Regulatory challenges
– Buy's Joly needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Buy's Joly business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Buy's Joly is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Buy's Joly
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Buy's Joly.
High dependence on third party suppliers
– Buy's Joly high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Buy's Joly in the Strategy & Execution sector and impact the bottomline of the organization.
Environmental challenges
– Buy's Joly needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Buy's Joly can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Buy's Joly with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Buy's Joly can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Buy's Joly can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Best Buy's Turn-Around Strategy (2013) .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Buy's Joly.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Buy's Joly in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Best Buy's Turn-Around Strategy (2013) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Best Buy's Turn-Around Strategy (2013) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Best Buy's Turn-Around Strategy (2013) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Best Buy's Turn-Around Strategy (2013) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Best Buy's Turn-Around Strategy (2013) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Buy's Joly needs to make to build a sustainable competitive advantage.